For Immediate Release
Chicago, IL – January 25, 2013 – Zacks Director of Research Sheraz Mian says, “Contrary to fears coming into the fourth quarter earnings season, the earnings reports have actually been quite decent.”
A Decent Earnings Season Thus Far
Contrary to fears coming into the fourth quarter earnings season, the earnings reports have actually been quite decent. They are not great, but they are not awful either, notwithstanding the strong negative reaction to Apple’s (AAPL - Analyst Report) report.
Not only are positive surprises at levels better than the previous quarter and comparable to the last many, but neither are we getting much negative guidance from management teams. One could discount the positive surprises as largely a function of lowered expectation, which had sharply come down in the run up to the start of the earnings season. But the absence of negative guidance has to count as a net positive in an otherwise no-growth earnings environment.
Total earnings for the 136 S&P 500 companies that have already reported results are up +1% from the same period last year, with 62.5% of the companies beating expectations with a median surprise of +2.4%. Revenues are up +5.5%, with 52.9% of the companies beating top-line expectations and a median revenue surprise of +0.6%. Most of that revenue growth is coming from a handful Tech and Finance companies, including Apple, Google and Citigroup (C - Analyst Report).
Combining the reports that have come out with the ones still to come, the composite fourth quarter earnings growth rate is essentially flat (up only +0.1%). The actual dollar amount of fourth quarter earnings is the lowest quarterly total in 2012 (see Table 5). But the expectation is for earnings growth to resume from the second quarter of 2013 and increase materially in the back half of the year. We have started expectations for 2013 come down a bit, but there is likely much more room to go.
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Contact: Sheraz Mian